Its not jailbroken. You WILL lose all your 3rd party apps if you upgrade.

Its not unlocked. With any method. If you're not using your iPhone with AT&T, and you upgrade right now, you will not have a working phone, and may not be able to fix that for a while.

If you've already upgraded to 1.1.3, downgrading to 1.1.2 does NOT work.Supposedly, downgrading to 1.0.2 works, so if you still want a jailbroken iPhone, you'll have to go down to 1.0.2, and follow the usual guides to upgrade to 1.1.2 and jailbreak etc.

iTunes 7.6 has no ill effects on 1.1.2 and lower iPhones. Yes, you should upgrade iTunes. Unless you have some other non-iPhone related reason to want to stay on 7.5.